Abercrombie Speaks Out Dave Marino-Nachison (TMF Braden)
October 13, 1999
In-crowd casual clothier Abercrombie & Fitch (NYSE: ANF), unlike many apparel retailers, doesn't issue regular same-store sales or earnings guidance, and the company's long-term focus alternately pleases and frustrates investors.
"The company's view," said company Investor Relations and Communications Director Lonnie Fogel in a StockTalk interview with the Fool this summer, "is I think investors are very shortsighted. We're trying to get people to look beyond the current week, the current month, even beyond the current quarter."
That changed today when the company sent out a press release saying third quarter-to-date same-store sales were up 12% after a "very strong" August and September back-to-school season. The back-to-school results, however, were offset in part by "less favorable" results from Abercrombie's regular October sales.
Abercrombie also said it remains comfortable with First Call's $0.31 consensus estimate for the quarter, which would represent 29% year-over-year growth from last year's $0.24. Look for results Nov. 9.
Why the sudden change of heart from Abercrombie?
It's a little baffling, given that the news wasn't particularly earthshaking and that the company's statement that back-to-school sales were strong speaks well to Abercrombie's continued excellence in merchandising and marketing. Keep in mind that where apparel companies are concerned, it's really August and September that matter most anyhow.
Nevertheless, somewhere along the line Abercrombie's information management went bad, forcing the company's hand.
Starting sometime late last week -- presumably Thursday night or Friday -- the shares started falling like a fraternity pledge after too much paddling. Following today's move, during which nearly 20% of the company's market value was gone by lunchtime, Abercrombie stock was well off its trading range of last week, during which it hung around the upper $30s.
Company officials heard enough and decided to stem the flow. Now, their job is to find out what happened, and investors need to consider the likelihood that someone in a position of power at the company -- who, it should be said, isn't clear -- leaked information to someone in the "investment community." While that may be par for the course in today's world, when a company works as hard as Abercrombie to manage information flow and something goes awry investors can really pay for it. In that context, Abercrombie's out-of-character move to pre-announce should probably be applauded.
Of course, there's still the little matter of the company's quarter. Some will say today's move is basically an indicator that investors were hoping for Q3 results to outdo Street estimates, as if a company's growth is best measured by the computations of a few MBAs as opposed to its own performance and goals. Keep in mind these analysts don't -- or at least shouldn't -- get monthly sales updates either.
Besides, as discussed by the Fool's Warren Gump in a recent Fool Plate Special, the company is an impressive performer and it looks to remain one for some time. The Q3 news doesn't appear particularly disappointing. Besides, the once white-hot shares had already been cooling of late, which makes the stock's fall over the last few days look especially outsized.
Here's a clue: count the number of brokerages that lowered their long-term ratings on Abercrombie over the last few days. The answer? None. In fact, only one -- Brown Brothers Harriman & Co. -- did any downgrading at all with a short-term "strong buy" cut to "buy." To the contrary, many are urging their clients to start shopping Abercrombie imm�diatement.
That's more like it. Investors should probably consider Abercrombie stock a serious sale opportunity while supplies last.
Abercrombie & Fitch Web Page
Abercrombie & Fitch Message Board
Fool Plate Special, 8/11/99: Abercrombie Keeps On Rowing
StockTalk, 6/7/99: Abercrombie & Fitch
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